(thanks to Tom Healy for the post) - When I go about the process of deciding on my pledge, it's pretty easy to figure my "outside" income: salary, proprietorship/partnership/S corporation income, social security, and pension (I don¹t include income from personal retirement accounts like IRAs or 401(k)s here; see below).
Figuring out the "income" from our investments is a little different. That's because the actual "cash" income depends on the investment choices I have made. I could invest in high fixed-income securities, which makes for a high cash flow; or I could invest in stocks whose only return is from capital gains "cash" income only when I sell securities. And some of the income could be in personal retirement accounts that, if I were younger, would not be ³available² for many years in the future, or might be in Roth IRAs that wouldn¹t have to be tapped at all in our lifetime.
Many retirement planners suggest that you should not spend more than 4% of your investment assets each year (one can argue whether or not that is a viable figure for not outliving your assets). So I have used that figure as a benchmark. Required minimum distributions from retirement accounts start out near the 4% figure as well, though the percent increases as you get older.
What do I include as investment assets? I include all of the family taxable investment accounts, savings, tax-exempt securities, and the following retirement accounts: Roth IRAs, traditional IRAs and SEPs, and 401(k)s.
Rather than taking a point-in-time value of the investment assets, I look at the value at the end of the prior 3 years (i.e., 2008, 2009, and 2010 for pledging decisions now) and calculate an average. That tends to even-out changes caused either by big drops (as in 2008), or big gains (as last year).
Applying the 4% figure to that average gives me the ³income² I¹m going to use in figuring my pledge. So, if the 3-year average is $100,000, that implies $4,000 of ³income.² I add that to my other ³outside² income to come up with a base income on which to make my pledge.
Erin and I are strong believers in supporting liberal churches, so we¹ve decided to ³tithe² our income at 10%. You might make a different choice.
Because Erin and I belong to different churches, that gets split 50/50 between First Unitarian and her church. But we also are in a position to support other causes, as we don¹t have the costs of raising children or a large mortgage that can be very significant in other homes. So our total giving is 15% or more of income (and that doesn¹t count political causes).
One of the things I¹ve noticed in years of preparing tax returns is how little most people, especially those at higher incomes, deduct as charitable contributions (rarely more than $300). The biggest donors tend to be people of modest means, for whom their religious community is a very important part of their lives they often are giving over 20% of their income; and people of substantial means who belong to churches that emphasize tithing.
For those of us in liberal churches, the impetus for the amount to pledge has to come from our hearts, not imposed by the congregation or pastor. So, here¹s a challenge to you: when you look into your heart, what does your pledge look like? Does it match the pledge you made? And if not, why not?
And remember, as circumstances change (either for better or worse), make appropriate changes to your pledge (up or down).
I would love to see my ³half-pledge² be down the list in the second 10% of givers, instead of near the top of the top 10% of givers. That would surely make our church that much more vibrant than it already is.
